Accountants, lawyers and doctors have raised concerns regarding potential tax reforms by UK Chancellor Rachel Reeves that could lead to increased national insurance (NI) contributions.
The Chancellor is reportedly planning to incorporate national insurance into the tax obligations for certain UK professionals.
According to estimates by the CenTax think-tank, this change is expected to impact approximately 200,000 individuals and raise around £1.9bn annually, reported Financial Times (FT).
In the UK, many large law and accountancy firms choose to operate as limited liability partnerships (LLPs). This structure provides them with the advantage of favourable tax treatment, even as they achieve substantial profit margins.
Furthermore, this structure allows them to be considered self-employed, thereby exempting them from paying employers’ National Insurance contributions.
The Times was the first to report that the chancellor’s budget may introduce this new levy on LLPs with an aim of addressing a substantial deficit in the nation’s public finances.
Reeves is anticipated to increase taxes in her upcoming Budget on 26 November, following weak economic projections and a series of reversals on welfare reductions.
According to Dan Neidle from Tax Policy Associates, eliminating the exemption for national insurance contributions for these partnerships would raise the marginal tax rate for partners from approximately 47% to 54%.
A senior partner at a leading accountancy firm told FT that the “frustrating and costly” new proposals might prompt numerous firms to abandon their LLP structures in favour of incorporating as companies.
A Treasury spokesperson told the BBC: “We do not comment on speculation around future changes to tax outside of fiscal events.”
